Financial Accounting Report: Analysis of Corr's Financial Statements

This report provides a comprehensive analysis of financial accounting practices through the examination of a sole trader company, Corr. It begins with the fundamental concepts of financial accounting, emphasizing the collection, recording, and calculation of financial data. The report details journal entries for various transactions, including sales, purchases, cash receipts, and payments, along with returns, discounts, and adjustments for depreciation and bad debts. Ledger accounts for key items like purchases, sales, cash, and receivables are presented to illustrate the flow of transactions. The report culminates in the preparation of a trial balance, profit and loss account, and a statement of financial position, demonstrating the process of creating financial statements. The analysis also includes discussions on the usefulness of asset reporting and the reasons for differences between cash accounts and profit, providing a complete overview of financial accounting principles.

INTRODUCTION TO
FINANCIAL
ACCOUNTING

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
1. Accounting records and financial statements for Corr............................................................1
Trial Balance:..............................................................................................................................8
2. Reporting of assets is useful....................................................................................................9
3. Causes of difference in cash accounts and profit..................................................................10
CONCLUSION .............................................................................................................................11
REFERENCES .............................................................................................................................12

INTRODUCTION
In accounting term, the method that is used by companies to collect, record and calculate
revenue, expenses and receivables is known as financial accounting (Bushman, 2014). It mainly
includes the formulation of effective financial documents which are used by stakeholders,
suppliers, employees, customer, business owner to make valuable decision. In this report Corr,
sole trader company is selected that help to better understand the concept of financial accounting.
In companies accounting personnels prepares financial statements which includes P&L Account,
balance sheet and trial balance which are ultimately used by management for managerial and
financial decision-making. The whole process of financial accounting begins with journal entries
and books and leaders which end with fictionalisation of balance sheet.
In this report accounting records and financial statements for Corr are being prepared,
reporting of assets is useful for making decision and Causes of holding cash is elaborated.
QUESTION 1
1. Accounting records and financial statements for Corr.:
Journal entries: Following are key accounting entries for September month's transaction in
books of Corr, as follows:
Sales on credit
S. No. Particulars Debit Credit
1 Mr Otis a/c Dr.
To Sales a/c
15000
15000
2 Mr Jack a/c Dr.
To Sales a/c
35000
35000
3 Mr Joe a/c Dr.
To Sales a/c
50000
50000
4 Mr Sean a/c Dr.
To Sales a/c
10000
10000
5 Mr Kawin a/c Dr.
To Sales a/c
25000
25000
1

Sales on cash
S. No. Particulars Debit Credit
1 Cash a/c Dr.
To Sales a/c
50000
50000
2 Cash a/c Dr.
To Sales a/c
35000
35000
3 Cash a/c Dr.
To Sales a/c
45000
45000
Returns inward
S. No. Particulars Debit Credit
1 Sales Return a/c Dr.
To Mr Kawin a/c
8000
8000
2 Sales Return a/c Dr.
To Mr Joe a/c
15000
15000
Receipts from trade receivables
S. No. Particulars Debit Credit
1 Cash a/c Dr.
To Trade Receivables a/c
15000
15000
2 Cash a/c Dr.
To Trade Receivables a/c
10000
10000
Purchases on credit
S. No. Particulars Debit Credit
1 Purchase a/c Dr.
To Alex Ronald a/c
30000
30000
2 Purchase a/c Dr.
To Adam a/c
10000
10000
3 Purchase a/c Dr. 25000
2

To Michael a/c 25000
4 Purchase a/c Dr.
To William a/c
32000
32000
5 Purchase a/c Dr.
To Nick a/c
40000
40000
Expenses paid for in cash
S. No. Particulars Debit Credit
1 Rent Dr.
To Cash a/c
5000
5000
2 Office Expenses a/c
Dr.
To Cash a/c
7500
7500
3 Electricity expenses a/c Dr.
To Cash a/c
3000
3000
Return Outwards
S. No. Particulars Debit Credit
1 Michael a/c Dr.
To Purchase Return a/c
5000
5000
2 William a/c Dr.
To Purchase Return a/c
15000
15000
Payments to trade payables
S. No. Particulars Debit Credit
1 Trade Payables a/c Dr.
To Cash a/c
6000
6000
2 Trade Payables a/c Dr.
To Cash a/c
4000
4000
Discount received and allowed
3

S. No. Particulars Debit Credit
1 Cash a/c Dr.
Discount Allowed a/c Dr.
To Miss Sophie a/c
25000
5000
30000
2 Miss Jennifer a/c Dr.
To Discount Received a/c
To Cash a/c
40000
4000
36000
Drawing
S. No. Particulars Debit Credit
1 Drawing Dr.
To capital a/c
3000
3000
2 Capital Dr.
To cash a/c
3000
3000
Loan
S. No. Particulars Debit Credit
1 Loan a/c Dr.
To Bank a/c
20000
20000
Purchase of Equipment for £20,000
S. No. Particulars Debit Credit
1 Equipment a/c Dr.
To Bank a/c
20000
20000
Wages paid in cash of £4,000:
S. No. Particulars Debit Credit
1 Wages a/c Dr.
To Cash a/c
4000
4000
Ratification Entry:
S. No. Particulars Debit Credit
4

Electricity Expenses A/c Dr.
To Drawings
1000
1000
Wages accrued:
S. No. Particulars Debit Credit
Wages A/c Dr.
To Wages Outstanding
1000
1000
Prepaid Rent:
S. No. Particulars Debit Credit
Prepaid Rent A/c Dr.
To Cash
2500
2500
Depreciation Entry:
S. No. Particulars Debit Credit
Depreciation A/c Dr.
To Equipment A/c
2000
2000
Allowance for doubtful debts should be 8% of the year end receivables:
S. No. Particulars Debit Credit
Trade receivables A/c Dr.
To Allowance for doubtful debts
(155860 * 8% = 12468.8)
12468.8
12468.8
Ledger accounts
Purchase Account
Date Particular Dr Date Particulars Cr
2018 2018
01/12/01 To Alex Ronald a/c 30000 By balance c/d 137000
02/12/01 To Adam a/c 10000
5

03/12/01 To Michael a/c 25000
04/12/01 To William a/c 32000
05/12/01 To Nick a/c 40000
137000 137000
Sales Account
Date Particular Dr Date Particulars Cr
2018 2018
To Balance c/d 265000 01/12/02 By Otis a/c 15000
02/12/02 By Jack a/c 35000
03/12/02 By Joe a/c 50000
04/12/02 By Sean a/c 10000
05/12/02 By Kawin a/c 25000
06/12/02 By Cash a/c 50000
07/12/02 By Cash a/c 35000
08/12/02 By Cash a/c 45000
265000 265000
Cash a/c
Date Particular Dr Date Particulars Cr
2018 2018
To Sales a/c 50000 By Rent a/c 5000
To Sales a/c 35000 By Electricity a/c 3000
To Sales a/c 45000 By Salaries a/c 50000
To bills Receivable a/c 15000 By Bills payable a/c 15000
To bills Receivable a/c 10000 By Bills payable a/c 20000
To Sophie a/c 30000 By Jennifer a/c 36000
6

To Capital a/c 45000 By balance c/d 101000
230000 230000
Return Outwards a/c
Date Particular Dr Date Particulars Cr
2018 To Balance c/d 20000 2018 By Michael 5000
By William 15000
20000 20000
Return Inwards a/c
Date Particular Dr Date Particulars Cr
To Mr Kawin a/c 8000 By Balance c/d 23000
To Mr Joe a/c 15000
23000 23000
Rent a/c
Date Particular Dr Date Particulars Cr
To Cash a/c 5000 By balance c/d 5000
Office expenses a/c
Date Particular Dr Date Particulars Cr
To Cash a/c 7500 7500
Electricity a/c
Date Particular Dr Date Particulars Cr
To Cash a/c 3000 By balance c/d 3000
Discount Allowed a/c
7

Date Particular Dr Date Particulars Cr
To Sophie a/c 30000 By balance c/d 30000
Discount Received a/c
Date Particular Dr Date Particulars Cr
To balance c/d 40000 By Jennifer a/c 40000
Trade Receivables Account
Particular Dr Particular Dr
To Balance b/d 45860 By Sales Return 23000
To Credit Sales 135000 By Allowance for bad debts 10628.8
By Cash 25000
By Balance C/d 122231.2
180860 180860
Trade Payable
To Purchase Return 20000 By Balance b/d 25900
To Cash 10000
To Balance C/d 130900 By Credit Purchase 135000
Profit and loss accounts
Profit and Loss Account
To Opening Inventory 51600 By Sales 542460
To Purchases 403300 By Purchase Return 20000
8

To Carriage inwards 1300 By Closing Inventory 62000
To Wages 56390
Add: Outstanding Wages 1000 57390
To Sales Return 23000
To Gross Profit 87870
624460 624460
To Rent 41880 By Gross Profit 87870
Less: Prepaid Rent 2500 39380 By Discount Received 4000
To Electricity 20100
To Allowance for
receivables 13628.8
To Depreciation of
equipment 2000
To Discount Allowed 5000
To Office Expenses 7500
To Net Profit 4261.2
91870 91870
Statement of financial position
Balance Sheet
Capital 165000 Equipment 170000
Add: Net Profit 4261.2 Add: Addition 20000
Less: Drawings 8000 Less: Depreciation 36000 154000
Add: Rectification in
Drawing 1000 178261.2
Trade Receivables 122231.2
9

Outstanding Wages 1000 Prepaid Rent 2500
Trade Payable 130900 Inventory 62000
Bank Loan 50000 Bank 12880
Other
Cash and Cash
Equivalent 6550
360161.2 360161.2
Trial Balance:
Trial Balance
Dr. Cr.
Equipment 190000
Trade Receivables 122231.2
Preapid Rent 2500
Inventory 62000
Bank 12880
Cash 6550
Bank Loan 50000
Trade Payable 130900
Outstanding Wages 1000
Capital 178261.2
Rent 41880
Prepaid Rent 2500
Electricity 20100
Depreciation of equipment 36000
Discount Allowed 5000
10